However, a fear that I always had is turning out to be true. Or, so it seems. Despite the attractiveness of India as a destination, outsourcers are yet to be fully convinced about the capability of Indian companies. What prompts me to write this so unequivocally is the Nasscom-released data on growth of this industry.

What is the problem? Isn’t 59 percent growth good enough, especially when IT services have grown by just about 18 percent?

I would like to remind the readers that these two industries are in two different phases of growth; their bases are very different. What is more, the IT services industry is going through a genuine slowdown. This industry is supposed to be the highest growth industry.

But that was just a reminder of something that we often lose sight of. That is not what is of concern. This piece is not about whether 59 percent growth is good enough.

What is of concern is something else. If you look at a further break-up of this figure, you will find that this fairly good figure is driven almost entirely by a whopping 90 percent growth recorded by captive units. The third-party vendors have grown by a mere 28 percent and have accounted for only about 42 percent of the whole industry’s revenues in 2002–03.

Hope no one will quarrel with me on the contention that 28 percent is not a good enough growth. More so when almost the entire industry agrees that the first phase of selling for India is over and things are in a growth mode now. It is not too early.

And it is certainly not big enough to slow down. It is the growth phase of the lazy S curve. And the growth figure is merely 28 percent—on a base of just about $769 million!

Why is it happening? Are the US outsourcers still not convinced about the capabilities of Indian companies, while agreeing on the capabilities of the Indian workforce to render those services? That is the fear that I wrote about in the beginning.

There is another possibility. Although I am unable to lay my hands on exact figures for the entire industry, the manpower growth of a few leaders suggests that probably they have bagged orders and ramped up really fast. Yet, that has not translated to a proportionate growth in revenue terms. The conclusion: the rates (revenue realization per employee per hour or month, if you love the jargons) have dropped considerably. That is even worse news.

While one can conclude that both the reasons are true to some extent, I just hope that the major transition of the industry from a contact center industry to a BPO industry happened this year and the higher value processes that came to some Indian companies are still small and will be reflected from this year onwards. bpOrbit does plan to do a detailed industry survey later this year to explain the industry better to all concerned, including ourselves.

But till then, I can just analyze from broader trends. What one sees of late is what could easily be called a second captive wave. After gaining practical knowledge about India while outsourcing on a pilot basis and during due diligence, many US companies, especially those that also do business in India, realized that setting up a captive unit is not a bad idea at all, considering the fact that few Indian BPO vendors provide any value-add other than one-time cost reduction. This has resulted in many captive centers being set up. Some more are in the pipeline.

Certainly things are not going be easier for Indian companies.

However, what makes one hopeful is that today there are more serious (may be small) Indian companies on the ground than ever before. And they will definitely make a difference.

To those who draw a parallel with the IT industry and point to the success of Indian companies like TCS, Infosys and Wipro despite all the competition from MNCs, let me remind of one fundamental difference. The pioneering steps in offshoring IT services to India were taken by these very companies. In BPO, it is the GE and Amex that kickstarted the revolution. But that is another debate altogether. We should not, in business, conclude too much based on history.

Shyamanuja Das